Correlation Between Semtech and NETGEAR

Can any of the company-specific risk be diversified away by investing in both Semtech and NETGEAR at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Semtech and NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Semtech and NETGEAR, you can compare the effects of market volatilities on Semtech and NETGEAR and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Semtech with a short position of NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semtech and NETGEAR.

Diversification Opportunities for Semtech and NETGEAR

0.49

Correlation Coefficient

Semtech  NETGEAR

Very weak diversification

The 3 months correlation between Semtech and NETGEAR is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Semtech is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Semtech are associated (or correlated) with NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Semtech i.e., Semtech and NETGEAR go up and down completely randomly.

Pair Corralation between Semtech and NETGEAR

Given the investment horizon of 90 days Semtech is expected to under-perform the NETGEAR. In addition to that, Semtech is 2.72 times more volatile than NETGEAR. It trades about -0.08 of its total potential returns per unit of risk. NETGEAR is currently generating about -0.09 per unit of volatility. If you would invest  2,903  in NETGEAR on December 26, 2024 and sell it today you would lose (440.00) from holding NETGEAR or give up 15.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Semtech  vs.  NETGEAR

Semtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Semtech and NETGEAR

The main advantage of trading using opposite Semtech and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semtech position performs unexpectedly, NETGEAR can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NETGEAR will offset losses from the drop in NETGEAR's long position.

The idea behind Semtech and NETGEAR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.